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Sunday, October 17, 2004

What would a national sales tax look like?

Daniel Altman does the math and suggests that a rate of 25% would be required to maintain the federal government's current revenue. And then he adds:

As part of its drive to create an "ownership society," the White House is chipping away at taxes on financial income and wealth. The estate tax is scheduled to vanish, taxes on dividends and capital gains have fallen, corporate income tax loopholes have grown, and proposals for enormous tax-free saving accounts would allow the sheltering of most portfolios.

All of these efforts point to a system that taxes only labor income like wages and salaries. Under this system, high-earning people might be able to shift their income into primarily nontaxed sources — for example, by taking their pay only in stocks, bonds and derivatives like options. With a national sales tax, at least, the top earners in the nation would have a much harder time avoiding taxes altogether.

Please note: Both sides of this perverse equation come from Republican proposals. Let's eliminate taxes on wealth — but, wouldn't ya know, that means rich people can duck taxes almost entirely! Better set up a regressive sales tax to keep the taxes flowing because it would just be too darn hard to close the loopholes the rich have given themselves. Either way, middle- and lower-income Americans will pay.